Speading the Joy

According to today's American Banker (paid subscription required), Barney Frank addressed the National Association of Federal Credit Unions and gave them the good news and the bad news. The good news was that he supported reform legislation being pushed by credit unions (the Credit Union Regulatory Improvements Act) that would raise the cap on business lending to 20% of a credit union's assets, from 12.25%, and would let any credit union, regardless of charter type, add underserved areas to its field of membership, increase lending investment limits, and ease restrictions on mergers and conversions. The bad news was that he intends that credit unions be subject to the Community Reinvestment Act.

"The principle that every financial institution has some responsibility to its community is where we start," he said. "How that is enforced is flexible … . I do not think that what we come up with will be any added burden for most of the credit unions."

No, of course not Barn. No more burdensome for credit unions than it is for banks and thrifts, who find CRA a pleasant exercise along the lines of dealing with loan sharks who threaten to break your kneecaps if you don't pay the "vig" on time and with the demands of terrorists who claim that they will execute one bank employee for every hour that you do not supply them with $1 billion (US) in unmarked bills and a Gulfstream V stocked with Tattingers, Dewar's, and 5 blond hookers with "large American breasts."

I recall a bank acquisition in the 1980s on which I worked while living in a Rocky Mountain metropolis. I worked for the buyer, which we'll call "Gonzo Bank," in honor of the late, great inventor of Gonzo Journalism, Aspen resident, and consumer of mass quantities of Mescaline, Hunter S. Thompson. Gonzo Bank was bushwhacked by a "community activist organization" we'll call SCUM (Society to Cut Up Money). SCUM called the local press, then held a noisy "rally" (i.e., riot) inside the bank's lobby at its downtown headquarters. They chanted slogans regarding the bank's failure to support inner city housing, and railed to the press and the cameras that there was no way a bank with such a poor CRA record should be allowed to acquire another financial institution, notwithstanding the fact that the bank had received a "satisfactory" CRA rating from its primary federal regulator. In a counterstrike of sheer brilliance, the bank agreed to contribute six figures to SCUM and to a fund for inner city housing administered by SCUM. SCUM's objections magically melted away.

Yes, credit unions need a taste of the third world thug-o-cratic tactics that only federal "do-good" legislation, enforced by the ruling classes of the "professionally aggrieved," are able to inflict. If banks and thrifts have to put up with this, there's no reason that credit unions shouldn't, especially if they're going to get all those juicy reforms that will make it difficult to tell a  bank from a credit union except when you're discussing net income "before taxes" and "after taxes."